This paper outlines a quasi-economic hydrological model and management paradigm geared toward public and not-for-profit regulatory bodies, with particular reference to the southern Murray-Darling Basin in southeast Australia. This value-oriented model and paradigm bridges the gap between short-range hydrological forecasting and long-range economic planning. Decision-making is assisted by a scenario-based methodology with a clear distinction between baseline and marginal quantities.
The paradigm has applications to seasonal planning, commercial water trading, environmental stewardship and structural adjustment. Specific applications to the Murray-Darling Basin include (i) evaluation of options for infrastructure upgrades and licence buybacks intended to address resource over-allocation, and (ii) revival and rationalisation of hydrological exchange rates for temporary and permanent water trades, with the aim of rigorously accounting for third-party effects.